Understand how an insurer actually makes money — on two engines, not one.
An insurer runs two profit engines: underwriting (take premium, pay claims and costs, keep the difference) and the float (hold policyholders' money between premium-in and claim-out, and invest it). Most Indian general insurers lose money on the first and are rescued by the second. Life insurance runs on a different clock again. Mapped from cause to effect.
Reading paths
- 1Read in order
Start Here
A four-stop tour of the whole map — the one number that verdicts underwriting, the second engine that rescues it, how life insurance runs on a different clock, and how you read it all off a results page. Fifteen minutes before you pick a deeper path.
- 3
The Combined Ratio Engine
The underwriting P&L, built one line at a time — how claims and costs combine into the single number that says whether an insurer makes money on insurance itself, and what that number is in rupees.
- Net Earned Premium
- Loss Ratio (Claims Ratio)
- IBNR Reserves
- Expense Ratio
- Commissions & Distribution Cost
- Combined Ratio
- Underwriting Result
- 4Read in order
Float & Investment
The second engine — the pool of policyholders' money an insurer holds and invests, and the income that so often turns an underwriting loss into a net profit.
- 5
The Regulator's Grip
Where IRDAI reaches into an insurer — the capital it forces onto the balance sheet, the cap on what can be spent chasing premium, the rules on what can be sold and priced, and the one price it still fixes itself.
- Required Solvency Margin
- Solvency Ratio
- Expenses of Management (EoM) Limits
- Product & Pricing Regulation
- Motor Third-Party (Tariff)
- 6
Life Insurance Economics
Life insurance on its own clock — where profit emerges over decades and premium is a terrible measure of a sale. How new business is sized, why policies staying alive is everything, and how it all resolves into embedded value.
- Annualised Premium Equivalent
- Persistency Ratio
- Surrender Value & the Exit Penalty
- Mortality & Morbidity Margin
- Life Product Mix
- Value of New Business
- VNB Margin
- Embedded Value
- 7
How the Insurer Is Judged
Read any insurer's results without being fooled. The handful of numbers that judge both engines and the life side — where the profit really came from, whether the insurer can pay its claims, and whether shareholders' capital worked.
- Reading an Insurer's Results
- Combined Ratio
- Underwriting Result
- Investment Income
- Net Profit (Insurer)
- Solvency Ratio
- Claims Settlement Ratio
- VNB Margin
- Embedded Value
- Return on Equity (Insurer)